Cable neither up nor down - SocGen

Analysts at Societe Generale forecast cable in the next months to stay in its new range above 1.20, but not rise as high as 1.30.

Key Quotes

“The UK outlook is definitely too gloomy to turn bullish Sterling and believe in a firm continuation of the ongoing short covering. On the other hand, a lot of bad news is already priced in and digested by the market, preventing it from being overly bearish. Brexit caused two Sterling debacles, first in June with the vote and then after the summer when PM May suggested a hard exit. Cable lost about 15% over a quarter and it now seems the dust has settled. In the process, volatility fell but remained relatively high on a historical basis. Assuming a medium-term range in cable and that negative surprises are no longer market tail risks, the GBP/USD volatility is a Sell.”

“On the GBP rates side, we do not expect the BoE to move until 2018, so we expect very little volatility at the front-end of the curve. The GBP-USD short rates differential driving cable since 2013 is unlikely to trend during 1H17, limiting cable directionality.”